People’s Republic of Walmart:
How the World’s Biggest Corporations Are Laying the Foundation for Socialism
By Leigh Phillips and Michal Rozworski
Verso Books, 2019
Among the most common arguments conservatives hurl at socialism is that planned economies always fail. Typically capitalists argue that, despite the flaws of the free market, it’s far better than any other system that has existed or could exist, because any system which tries to overcome the market will inevitably lead to authoritarianism and inefficiency. The collapse of the Soviet Union seemed to lend credence to this argument. Even many in the resurgent left, such as Bernie Sanders, while arguing for very significant reforms including taking health insurance and utilities into public ownership, still fundamentally accept leaving most of the economy in private hands.
However, Leigh Phillips and Michal Rozworski, in their new book People’s Republic of Walmart: How the World’s Biggest Corporations Are Laying the Foundations for Socialism, have helped show how the very examples of efficiency in capitalist society itself disprove the arguments against planning. Their argument runs as follows: despite operating in an external market, the internal life of corporations, such as Walmart, rely upon internal cooperation and sharing of information through the use of computerized information technology. Unlike a socialist planned economy, this planning is done for the sake of profit, rather than for human need, and relies upon the tyrannical exploitation of their workforces. Nonetheless, this reveals that large-scale planning is not only possible, but necessary even under globalized capitalism.
The book unfortunately falls short on providing a program to achieve a democratically planned economy, but it nonetheless provides a set of useful case studies of economic planning to prove its viability.
The Economic Calculation Debate
Throughout the book, the authors return to the question of the so-called “economic calculation debate” which questioned whether planning a national-scale economy is possible. This debate arose largely because of the rise of the Soviet Union, which seemed in the early 20th century to demonstrate the viability of large-scale planning. In response, right-wing “Austrian school” economists Ludwig von Mises and Friedrich Hayek formulated the most well-known arguments against the possibility of economic planning.
Mises directed his attacks against the anti-capitalist, but non-Marxist economist Otto Neurath, who believed that the entire economy could be organized on a similar basis as the German wartime economy – planned by a central body where “money and markets play no role in the allocation of goods” (p. 24). Contrary to Neurath, Mises claimed – in Phillips and Rozworski’s words – that “No human process could possibly gather all the necessary data, assess it in real time, and produce plans that accurately describe supply and demand across all sectors…These inefficiencies would result in such social and economic barbarities – shortages, starvation, frustration, and chaos – that even if one accepts the inevitability of inequalities and attendant myriad other horrors of capitalism, the market will still appear benign by comparison” (p. 28). By contrast, Mises claimed that, the free market, in spite of its limitations, used prices to automatically calculate optimal resource allocation.
Hayek, the godfather of neoliberalism, attacked socialism on a different basis. He differed from some other capitalist economists in that he questioned the longstanding capitalist assumption of rational, omniscient, and self-interested market actors. Instead, he argued that humans are often irrational. From this he concluded that a key role of markets was that they actually produced information, and that central planners would not be able to produce all of the information necessary to make judgments.
Throughout the book, Phillips and Rozworski deal with other aspects of the economic calculation debate, going into more depth regarding Neurath and others’ ideas. But much of the debate took place through the language of abstract formalism. Regardless of theoretical debates over economic calculation, Walmart and Amazon have in practice settled the issue: huge economies can be planned. As Phillips and Rozworski put it:
“If something works in theory but not in practice, then there is usually something wrong with the theory. But it is equally true that if something in theory does not work, but in practice it does, then again, something must be wrong with the theory. And here is where the villainous Walmart enters our story. Walmart is perhaps the best evidence we have that while planning appears not to work in Mises’s theory, it certainly does in practice. And then some” (p. 30).
Socialist Alternative has long pointed out that despite capitalist society’s reliance on markets, Walmart and other mega-corporations have vast internally planned economies. Walmart is the world’s largest company by revenue (exceeding the Soviet Union at its height), by workforce with 1.5 million U.S. workers alone, and by U.S. imports. Their physical network of supply chains, from overseas suppliers to 11,000 stores, requires planning on a global scale.
Walmart’s and Amazon’s success depend on the technological and organizational innovations that drove the logistics revolution, such as mechanized inventory control, bar codes, and shipping containers. Amazon, riding Walmart’s coattails, has made special use of “Big Data” collected from its surveillance mechanisms – not only knowing what you bought, but what you thought about buying – to carve and expand its own planned empire within retail markets.
The authors point to a counter-example in the form of Sears’ CEO, Edward Lampert, who, inspired by the free market guru Ayn Rand, ruined Sears by eschewing planning and instead having different divisions mimic separate firms competing in a market. The appliance division, for example, had to pay fees to the branding division to use Sears’ Kenmore brand, but discovered that it was cheaper to market third-party appliance brands instead (pp. 41-43). Needless to say, the company became at war with itself and has since succumbed and declared bankruptcy.
Thus the authors reveal capitalism’s “dirty secret”: “the market economy is not only rife with planning, but with authoritarian planning [within firms] that concentrates economic decision making in the hands of wealth owners and keeps workers in line” (p. 50). These are “islands of tyranny” in a sea of misery. Beyond the individual firm, the authors claim, financial markets and banks allocate and redistribute resources throughout the economy, adjusting the pace of economic activity, in a role akin to central planners: “Interest rates, financial sector regulations and loan decisions are capitalism’s way of choosing between different possible economic plans.”
It is true that important actors in the financial system, and especially central banks, make decisions that affect the whole economy and have access to a wealth of detailed economic information in the same way that a central planner might. Marx once remarked that “The banking system possesses, indeed, the form of universal book-keeping and distribution of means of production on a social scale, but solely the form,” (Capital Vol. 3, Ch. 36). Socialist planning will require a democratic system analogous to a bank for making investment decisions. But ultimately a direct comparison to central planners is somewhat fraught, because of the extent to which competition between different groups of financial capitalists dominates in investment decisions. This is especially true on an international scale, where the financial capitalists of different imperialist powers, such as China and America, compete for control of world markets. The authors underemphasize the role that competition within the financial sector plays, and don’t even mention the role of competition between imperialist powers in shaping investment decisions.
What About Russia?
While the internal planning in Walmart and Amazon may show the viability of a planned economy, the planning in these companies is thoroughly undemocratic. This leaves open the question of whether democratic planning is viable. For opponents of a planned economy, the example of the Stalinist dictatorship in the Soviet Union is held up as a warning. Phillips and Rozworski come to a different conclusion: “Mises and Hayek have it backwards: it is not that degradation of economic information as a result of planning leads to authoritarianism, but that authoritarianism drives degradation of information, which undermines planning” (p. 150).
The Russian Revolution of 1917 brought workers to power on a national scale for the first time in history. In the early days of the Soviet Union rapid shifts were made to the economic and social life of the country. Huge social gains were made for working people, especially oppressed nationalities, women and LGBTQ people and the rule of the tyrannical czar was defeated. Lenin, Trotsky, and other Bolshevik leaders made clear from the start that if the revolution did not spread across Europe into more advanced countries, it was doomed to fail.
There were many heroic attempts made at revolutions in the years following 1917, all of which ended in bloody counter revolution. Unfortunately, because of the isolation and desperate economic conditions of the Soviet Union in the years after the revolution, a bureaucracy was able to win control, with Stalin as its chosen representative. With workers and officials afraid of political consequences for speaking frankly, the bureaucracy’s ability to plan was continuously degraded. The information available to planners was of limited quality, and the interests of bureaucrats in retaining their privileges and surviving dominated over the interests of society.
A chilling example is given in the book: during the forced collectivization of agriculture, where peasants were conscripted onto collective farms with inadequate equipment and training, volunteer technicians were dispatched to educate them on technical matters. Realizing quickly that the pace of collectivization was far too rapid and heading toward disaster, the technicians warned central authorities. Instead of heeding their warning, the technicians were denounced as wreckers and enemies of the revolution, and executed or sent to labor camps. The result was mass starvation, especially in the Ukraine.
In explaining the failure of bureaucratic planning, Phillips and Rozworski echo the analysis of the Russian revolutionary Leon Trotsky, who lead the struggle against Stalinism: “Under a nationalized economy, quality demands a democracy of producers and consumers, freedom of criticism and initiative – conditions incompatible with a totalitarian regime of fear, lies, and flattery,” (The Revolution Betrayed, 1936, Ch. 11).
While Phillips and Rozworski successfully demonstrate that economic planning does not inevitably lead to dictatorship, they stumble when it comes to explaining why the Soviet bureaucracy came to power. Specifically, the authors criticize the Bolsheviks for their supposed lack of a coherent strategy for economic planning in this period. They contrast the Bolsheviks with Otto Neurath, who had constructed a “detailed theorization of how socialist industries would have to be organized” (p. 151).
The Bolsheviks economic program in 1917 focused on demands such as transferring state power to the emerging soviets (workers councils), confiscating the profits of the capitalists, nationalizing the banks, and allowing workers to inspect and hold accountable all operations of the capitalist enterprises. While Neurath’s schemes are interesting, and perhaps useful for an advanced capitalist economy, they would have been of limited utility in the semi-feudal economy of Russia in 1917.
The Bolsheviks were faced with civil war and foreign invasions, as well as the semi-feudal economy of pre-revolutionary Russia. Initially it was hoped that the revolution would take hold elsewhere, and indeed it did spread to Germany and Hungary. The combination of Russian resources and German industry could have been the basis for a powerful planned economy across the Eurasian landmass. This would have been the beginning of the global transition to socialism.
But tragically those movements were quashed, leaving the revolution isolated. This isolation, and the death of many workers during the war, allowed the bureaucracy to develop. Here, the authors would have done well to look more into Trotsky’s explanation of Stalinism. He argued that bureaucracy developed to control the distribution of goods during times of scarcity (The Revolution Betrayed, Ch. 5).
However, even despite this bureaucracy, the planned economy was still able to deliver significant gains to workers as the living standards of the Soviet population were raised at a faster rate than they would have under capitalism, especially in the Central Asian republics. For example, homelessness was almost completely eliminated in the Soviet Union.
The Soviet Union went from having a largely agrarian economy to sending the first person to space in a matter of three decades, achieving unprecedented levels of growth, albeit at tremendous human cost due to bureaucratic ineptitude.
There were of course serious limits to what an isolated workers state could accomplish, especially without workers democracy. Still, after its collapse and privatization, numerous problems began to re-emerge, such as a sharp increase in infant mortality, collapse in wages, and a rise in ethnic conflict.
Limits of Social Planning Within Capitalism
The authors look at attempts to implement planning through reforms within capitalism. For example, Britain’s National Health Service (NHS), won as a concession to the powerful mid-century workers’ movement, is a massive state-run public institution, designed to serve a public need without being driven by the profit motive. However, the authors argue lack of community and worker control left NHS susceptible to continuous erosion from neoliberal reforms installed under Margaret Thatcher and since then (p. 146). Thus, control of the industry must not only be wrested from the capitalists though nationalization, but then must be democratized.
However, the authors don’t sufficiently acknowledge what a huge boon even this somewhat technocratic NHS was for the working class. Simply taking health care out of the realm of the market allowed millions of working-class people to avoid illness and premature death. In addition, the authors focus on the lack of democracy as the chief cause of the NHS’s erosion. More important, though, is the capitalists never accepted the NHS as a permanent reality and saw it as a “bad example.” They sought to run it down and also saw it as a potential market to be exploited. As the labor movement retreated in the past thirty years, the British elite advanced a neoliberal offensive that has led to significant cuts and privatization of parts of the NHS.
The authors also examine a dynamic but short-lived instance of planning in Salvador Allende’s Chile. Allende, a left-wing reformist, came to power in 1970 and initiated a series of radical changes spurred on by workers, such as nationalization of parts of the economy and the development of a “proto-internet” called Cybersyn. This system connected various factories and facilities via telephone lines to a central computer. Although the authors correctly highlight the radical possibilities of both Cybersyn and the NHS, they do not describe what would’ve been necessary to keep these reforms from being eroded or destroyed by the capitalist class.
Nationalizing a large section of the economy could be a step toward socialism, but only if the state power itself is firmly committed to that transition. This requires breaking the political power of the capitalists and establishing a workers government. We will not be able to establish democratic planning through a series of reforms. Allende envisaged a peaceful and gradual implementation of socialist planning, which left him unprepared for the U.S.-backed military coup that installed a military dictatorship for more than 25 years.
The authors see the example of Cybersyn as a possible way forward to avoid the dangers of a bureaucratic system like the one that arose in the Soviet Union. They argue that this example shows that “contemporary processing power and telecommunications networks can work to overcome the economic calculation challenge” (p. 229).
Unfortunately, while the authors do present a vision of a new society, they offer no clear program as to how to get there. They present global democratic planning as a goal, but they present this as something to work toward “over generations.” Reforms are often peeled back by the capitalists and a threat of global democratic planning would be met with iron resistance, as happened in Chile. Bafflingly, in a book about Walmart that emphasizes public ownership, the authors do not explicitly state the need to bring Walmart into public ownership. The very act of nationalizing the world’s largest private employer could have revolutionary implications. Ultimately, a revolutionary program will be necessary to implement any large-scale democratic planning. The authors emphasize the technical developments that make planning more efficient, but even more important is the organization of working class power to take planning into our own hands.
That being said, The People’s Republic of Walmart presents a series of useful case studies, ranging from contemporary capitalist practices to historical socialist societies, that demonstrate that not only is large-scale economic planning feasible, it is actually preferable. The book is a useful demonstration of the old adage from Marx that capitalism, in this case Walmart and Amazon, ultimately produces its own gravediggers, but only if the working class wields the shovels.